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Life likely to be harder this year, says Prof Mwanalushi

Life likely to be harder this year, says Prof Mwanalushi
Written by Mutuna Chanda in Kitwe
Saturday, February 14, 2009 4:32:31 AM

LIFE in Zambia is likely to be harder this year than it has been in the recent past, Caritas Zambia immediate past chairman Professor Muyunda Mwanalushi has said.
During a ZICA post-budget tax review workshop in Kitwe yesterday, Prof Mwanalushi said finance minister Dr Situmbeko Musokotwane's optimistic vision for Zambia in this year's national budget did not appear to be firmly grounded in the reality of what was happening in the global and domestic economic environments.

"Such optimism does not find support from what has actually happened," Prof Mwanalushi said. "For the years 2006 to 2008, GDP [Gross Domestic Product] growth averaged 6.1 per cent per annum, well below the required minimum growth rate of seven per cent. The minister envisages a growth rate of five per cent for 2009; well, well below seven per cent. First, the five per cent growth rate ignores the likely impact of the global economic downturn on our economy.

"Overall, the world economy is expected to grow by less than three per cent this year. Where will the five per cent for Zambia come from? Moreover, our external debt is steadily gathering momentum as is domestic debt. Domestic borrowing is expected to contribute seven per cent to this year's revenue. Domestic borrowing amounts to printing money, which will in turn fuel inflation. The projected 10 per cent inflation rate for 2009 is therefore unlikely to be attained. With high inflation all the basic necessities become unaffordable to the majority of the citisenry."

He criticised the budget as appearing not to have a strategy for job creation.

"With looming redundancies, the budget does not appear to have a strategy for job creation," he said.

"And so increased numbers of the jobless, increased electricity tariffs, high inflation, increased domestic and external debt, reduced disposable incomes...life in Zambia is likely to be harder this year than it has been in the recent past. The minister's vision therefore remains a mirage!"

He also proposed that Zambia considered linking inflation to the tax bands as opposed to just linking it to the tax-exempt threshold, as was the case in this year's budget.

"In our 2009 budget, such action is proposed for the threshold which is to be raised from K600,000 to K700,000," he said. "The increase of just 16.6 per cent matches almost exactly the annual inflation in 2008. It would, we suggest, have been appropriate to apply inflation linking also to the tax bands instead of raising each by a flat K100,000. If the principle of inflation linking was embraced as standard practice, much contention would be avoided and the system would become readily accepted by taxpayers as fair. Inflation linking is integral to fair taxation. It protects taxpayers against tax-creep through inflation. By the same principle, salaries and pensions also need protection against inflation which is enemy number one of saving and development."

Prof Mwanalushi further said the marginal increases to education and health were not likely to markedly improve services in the two social sectors.

"This year's allocation to education and health have marginally increased from 15.4 per cent and 11.5 pr cent in 2008 to 17.2 per cent and 11.9 per cent respectively; water and sanitation have been allocated 3.8 per cent of the budget," said Prof Mwanalushi.

"Meanwhile, general public services - the civil service bureaucracy - has been allocated almost a third of the total budget - 31.8 per cent. These marginal increases are not likely to significantly improve educational and health services; neither is there likely to be a significant increase in the percentage of the population with access to clean drinking water. So we will continue to see increased cases of malaria, high pupil-teacher ratios and lack of drugs in our hospitals and clinics."

Labels: ECONOMY, GREAT DEPRESSION II, MUYUNDA MWANALUSHI

posted by MrK @ 4:32 AM